Exclusive-Apple hit with antitrust case in India over in-app payments issues

By Aditya Kalra

NEW DELHI (Reuters) – Apple Inc (NASDAQ:AAPL) is facing an antitrust challenge in India for allegedly abusing its dominant position in the apps market by forcing developers to use its proprietary in-app purchase system, according to a source and documents seen by Reuters.

The allegations are similar to a case Apple faces in the European Union https://reut.rs/38nEVZZ, where regulators last year started an investigation into Apple’s imposition of an in-app fee of 30% for distribution of paid digital content and other restrictions.

The Indian case was filed by a little-known, non-profit group which argues Apple’s fee of up to 30% hurts competition by raising costs for app developers and customers, while also acting as a barrier to market entry.

“The existence of the 30% commission means that some app developers will never make it to the market … This could also result in consumer harm,” said the filing, which has been seen by Reuters.

Unlike Indian court cases, filings and details of cases reviewed by the Competition Commission of India (CCI) are not made public. Apple and the CCI did not respond to a request for comment.

In the coming weeks, the CCI will review the case and could order its investigations arm to conduct a wider probe, or dismiss it altogether if it finds no merit in it, said a source familiar with the matter.

“There are high chances that an investigation can be ordered, also because the EU has been probing this,” said the person, who declined to be identified as the case details are not public.

The complainant, non-profit “Together We Fight Society” which is based in India’s western state of Rajasthan, told Reuters in a statement it filed the case in the interest of protecting Indian consumers and startups.

In India, though Apple’s iOS powered just about 2% of 520 million smartphones by end-2020 – with the rest using Android – Counterpoint Research says the U.S. firm’s smartphone base in the country has more than doubled in the last five years.

The Apple case in India comes just as South Korea’s parliament this week approved a bill that bans major app store operators like Alphabet (NASDAQ:GOOGL) Inc’s Google and Apple from forcing software developers to use their payment systems.

“MIDDLEMAN IN TRANSACTIONS”

Companies like Apple and Google say their fee covers the security and marketing benefits their app stores provide, but many companies disagree.

Last year, after Indian startups publicly voiced concern https://reut.rs/3kA0hsS over a similar in-app payments fee charged by Google, the CCI ordered an investigation https://reut.rs/3l9vJgB into it as part of a broader antitrust probe into the company. That investigation is ongoing.

The India antitrust case against Apple also alleges that its restrictions on how developers communicate with users to offer payment solutions are anti-competitive, and also hurt the country’s payment processors who offer services at lower charges in the range of 1-5%.

Apple has hurt competitors by restricting developers from informing users of alternative purchasing possibilities, thereby harming “app developers’ relationship with their customers by inserting itself as middleman in every in-app transaction,” the filing added.

In recent weeks, Apple has loosened some of the restrictions for developers globally, like allowing them to use communications – such as email – to share information about payment alternatives outside of their iOS app.

And on Wednesday, it said it would allow some apps to provide customers an in-app link to bypass Apple’s purchase system, though the U.S. firm retained a ban on allowing other forms of payment options inside apps.

Gautam Shahi, a competition law partner at Indian law firm Dua Associates, said that even if companies change their behaviour after an antitrust case in filed, the CCI still looks at past conduct.

“The CCI will look at recent years to see if the law was violated and if consumers and competition were harmed,” said Shahi.

The CCI has plans to speed up all cases involving big technology firms such as Amazon (NASDAQ:AMZN) and Google by deploying additional officers and working to more stringent internal deadlines, Reuters reported https://reut.rs/3sYEAXc in June.